Business.govt.nz

TPP: What it means for small business

Negotiations for the Trans-Pacific Partnership free trade agreement have concluded. The 12 countries involved account for 36 per cent of the global economy - but what does it mean for your business?

Negotiations for the Trans-Pacific Partnership free trade agreement have concluded. The 12 Asia-Pacific countries involved account for 36 per cent of the global economy - but what does it mean for your business?

If you export goods or services to Asia-Pacific countries, then you’re not alone. In 2014, TPP countries were the destination for 40 per cent of New Zealand’s goods exports ($28 billion) and 47% of New Zealand’s services exports ($8 billion). ,

The Government says the TPP offers much better access to large and important markets for New Zealand’s goods and services.

It will create new trade and investment opportunities, diversify New Zealand’s export destinations and help firms do business overseas.

The TPP is expected to come into force within two years. In preparation for that, here are some areas where it could benefit small businesses.

Exporting

Export tariffs will be eliminated on 93 per cent of New Zealand’s trade with its new partners. The TPP will also reduce non-tariff barriers to trade that hold up or prevent export shipments.

“Wine, honey, meat, forestry, all of those have had reasonably good reductions of tariffs into the countries we export into,” says Rick Shera, a partner at Lowndes Jordan, on the Idealog website (external link).

The TPP will reduce barriers to trade in services. Access to TPP markets has been locked in for New Zealand service providers across a range of sectors, including providers of professional, business, education, environmental, transportation and distribution services.

In addition, New Zealand businesses will be able to compete for government procurement contracts in TPP countries on an equal footing with domestic suppliers.

Exporting can be a great option for tapping into bigger markets, but make sure you do your research first.

New markets

There are 12 countries in the TPP: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.

The TPP is New Zealand’s first free trade agreement with the US, Japan, Canada, Mexico and Peru. Over $12 billion of New Zealand goods and services were exported to these five countries in 2014.

The TPP Temporary Entry chapter will enhance access for New Zealand business people in the TPP region.

Pramuk Perera, doctoral researcher on international business at University of Otago, told Idealog (external link) that: “It’s still not too late for SMEs to explore partner markets, identify business partners, and identify business models in order to make a timely entry into these new markets and demand a better price for their products and services.”

Business NZ (external link) says the deal is great for opening up markets for a small country like New Zealand. Chief executive Phil O’Reilly says: "If New Zealand wants to broaden its economic base and move away from an over-reliance on selling commodity products to the world, we needed to secure a high quality deal that gives greater market access to both goods and services exports and one that encourages investment.”

The New Zealand Institute of Economic Research (external link) describes the TPP as an impressive achievement, even though it’s not perfect. Deputy chief executive John Ballingall says it’s not just about tariffs – it’s also about competitiveness. “TPP will remove some of the grit in the wheels of Asia-Pacific supply chains. This will lower transaction costs for Kiwi firms, again boosting competitiveness and opening new avenues.”